NY hedge fund charged with $1 billion fraud

In June, the Federal Bureau of Investigation arrested a longtime associate of Nordlicht, Murray Huberfeld, along with Norman Seabrook, the head of the country's largest municipal jail guard union.

Seabrook, the former union leader for New York City's jail guards, has pleaded not guilty to charges that he accepted a $60,000 bribe in 2014 in exchange for investing $20 million of union money with Platinum Partners.

"Platinum Partners purported to be a standard bearer in the hedge fund industry, reporting annual average returns of more than 17 percent since inception in 2003", Robert L. Capers, United States Attorney for the Eastern District of NY, said at a news conference.

As investors sought redemptions, the hedge funds "engaged in numerous improper measures in an attempt to meet redemption requests, including taking out high-interest rate loans, commingling monies among funds, and raising money from new investors through fraudulent misrepresentations", he said.

In 2012, for example, executives misrepresented to auditors the value of Black Elk, an oil and gas company controlled by Platinum, valuing it at $283 million, prosecutors contend.

Founder and Chief Investment Officer Mark Nordlicht and the Platinum funds overstated the value of an oil company that was among their largest assets, the SEC alleged.

Founded in 2003, Platinum Partners is an investment management group that as recently as March reported to the SEC and other regulators that it had $1.7 billion in assets under management.

USA prosecutors said on Monday that the founder of the New York-based hedge fund Platinum Partners and six others were set to be indicted on charges that they participated in a fraud totaling approximately $1 billion. In actuality, the firm's investments were worth far less, and Platinum's executives knowingly faked the performance figures, authorities said.

That liquidator, RHSW Caribbean, filed the Chapter 15 bankruptcy petition which seeks to protect Platinum's US assets from creditors while an insolvency proceeding is underway in the Cayman Islands.

The case is U.S. v Nordlicht, 16-cr-640, U.S. District Court for the Eastern District ofNew York (Brooklyn).